Global stocks gain on Big Tech lift; yen swings to fresh 34-yr low

By Chris Prentice and Naomi Rovnick

NEW YORK/LONDON (Reuters) -Global stocks were higher on Friday as Big Tech gains lifted Wall Street shares, while Japan’s yen hit a fresh 34-year low after the Bank of Japan (BOJ) opted to keep monetary policy loose at its latest meeting.

MSCI’s broad index of global stocks reversed earlier losses, rose 0.94% by 10:43 a.m. ET (1443 GMT) after U.S. shares opened to tech sector optimism following robust results from Alphabet and Microsoft.

U.S. data also boosted sentiment, with the consumption expenditures(PCE) price index up 0.3% in March, in line with estimates by economists polled by Reuters. In the 12 months through March, PCE inflation advanced 2.7% against expectations of 2.6%.

The Dow Jones Industrial Average rose 137.46 points, or 0.36%, to 38,223.26, the S&P 500 gained 53.21 points, or 1.05%, to 5,101.63 and the Nasdaq Composite gained 310.27 points, or 1.99%, to 15,922.03.

Japan’s yen was volatile, hitting a fresh 34-year low after the Bank of Japan (BOJ) kept monetary policy loose at its latest policy meeting, spiking briefly as traders speculated that Japanese authorities may intervene, then sliding again.

The STOXX 600 index rose 1.2%, and the FTSE 100 index climbed to a fresh record high.

World equities were still poised to finish the month lower, as hopes of rapid Federal Reserve rate cuts drained from the market following a series of U.S. inflation readings.

In a volatile session, the Japanese currency weakened as low as 157 against the dollar, a fresh 34-year low.

The Bank of Japan kept interest rates around zero at its policy meeting that concluded Friday, despite forecasting inflation of around 2% for three years.

Markets are on high alert for Tokyo authorities to prop up the currency, in what would be an unconventional and politically tough decision. BOJ Governor Kazuo Ueda said on Friday that exchange-rate volatility could significantly impact the economy.

U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that currency intervention was acceptable only in “rare” circumstances and that market forces should determine exchange rates.

Yellen also said U.S. economic growth was likely stronger than suggested by weaker-than-expected data on first-quarter output.

“The stall-out of inflation’s return to 2% in the first quarter is still a disappointment,” Bill Adams, Chief Economist for Comerica Bank in Dallas, said in a market note.

“When the Fed meets next week, they are almost certain to say that the first quarter’s economic data don’t hit their high bar to begin cutting interest rates.”

The yen was trading about 40% below its fair value, Pictet Asset Management chief strategist Luca Paolini said.

“We underestimate the potential for something to go very wrong when you have a currency that is totally misaligned with (economic) fundamentals,” he said.

“The sooner they hike rates, the better.”

FED HOPES FADE

The yield on benchmark U.S. 10-year notes fell 4.5 basis points to 4.661%, from 4.706% late Thursday. Bond yields rise as prices fall.

The 2-year note yield, which typically moves in step with interest rate expectations, fell 1.1 basis points to 4.9871%, from 4.998%.

Traders now expect the Fed to lower its main funds rate, currently at a 23-year high of 5.25% to 5.5%, by just 36 basis points this year, with some fearing a further hike.

Euro zone bond yields slightly extended their fall after the U.S. data. They touched five month highs on Thursday. [GVD/EUR]

The ECB is expected to cut its deposit rate from a record 4% in June but analysts have queried how far it can diverge from U.S. monetary policy without weakening the euro significantly.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.75% higher at 535.58, while Japan’s Nikkei rose 306.28 points, or 0.81%, to 37,934.76.

Spot gold added 0.02% to $2,332.27 an ounce. U.S. crude lost 0.16% to $83.44 a barrel and Brent fell to $88.87 per barrel, down 0.16% on the day.

(Editing by Gareth Jones, Mark Potter and David Evans)